Claim that company was misled about Hard Rock profitability rejected

Thursday 05 October 2023

A disputed franchise agreement played no part in losses suffered by a British Virgin Islands company running a Hard Rock café in the Cayman Islands, the Royal Court has found.

In a long-running dispute between HRCKY, and Hard Rock Limited and Hard Rock Cafe International – the origins of which lie in an agreement signed more than 24 years ago – the Royal Court has rejected claims that the British Virgin Islands company was misled by statements about the likely profitability of the Hard Rock franchise.

Their agreement to run the café had been terminated by Hard Rock in June 2013, a move which the court had previously ruled was legal when it was challenged.

But the court's judgment gave rise to a counter-claim from HRCKY in which they sought damages because they said they had entered the agreement on the basis of alleged misrepresentations made by Hard Rock.

In his judgment, Commissioner Matthew Thompson – who was sitting with Jurats Kim Averty and David Le Heuzé – said the court had to consider the scope of the doctrine of "dol", "including whether one party in the possession of significant information is under a duty to inform the other party of that information before they enter into a commercial arrangement".

The court heard that, having elected to run the cafe in the Cayman Islands, HRCKY made significant profits up to and including 2006 but those profits tailed-off, following a relocation of the disembarkation point for cruise passengers.

"This meant that the premises from which the Hard Rock café operated was no longer the closest restaurant to the departure point for cruise ship passengers. Yet such passengers were the principal source of revenue for HRCKY," Commissioner Thompson said.

"It can be seen...that HRCKY never really recovered from this relocation from 2007 onwards and at best only just broke even in 2010, 2011 and 2013. The effect of the world-wide financial crash in 2008 and 2009 can also clearly be seen."

Dismissing all the claims brought by HRCKY, Commissioner Thompson said that the company's losses arose "from factors external to both HRCKY and the Hard Rock Group".

Even if the company had shown that there had been any misrepresentation in relation to the agreement, "further evidence would have been required in respect of losses arising from any such findings", he added.